Defense Sector Leads Third-Quarter Performance for General Dynamics

- Overall revenues grow 8.1 percent
- Demand continues for vehicles, ammunition, IT and engineering services
- Full-year EPS guidance increased

General Dynamics ~ October 28, 2009
FALLS CHURCH, Va., Oct. 28 /PRNewswire-FirstCall/ -- General Dynamics (NYSE: GD - News) today reported 2009 third-quarter earnings from continuing operations of $575 million, or $1.48 per share on a fully diluted basis, compared to 2008 third-quarter earnings from continuing operations of $634 million, or $1.59 per share fully diluted. Revenues rose to $7.7 billion in the quarter, an 8.1 percent increase over third-quarter 2008 revenues of $7.1 billion. Net earnings in the third quarter of 2009 were $572 million. Financial performance in the quarter was impacted by a previously announced five-week production furlough in July and August at the company's Gulfstream Aerospace subsidiary, taken in response to global economic conditions.

Cash
Net cash provided by operating activities from continuing operations was $594 million for the third quarter. Free cash flow from operations, defined as net cash provided by operating activities from continuing operations less capital expenditures, was $513 million, or 89 percent of earnings from continuing operations.

Backlog
Total backlog at the end of the third quarter 2009 was $66.2 billion. Backlog grew in the Combat Systems and Information Systems and Technology segments in the quarter, reflecting continued strong demand for the company's vehicle and ammunition products and information-technology services. New orders received included $950 million for production, support and reset of Stryker infantry combat vehicles for the U.S. Army, as well as ammunition orders for U.S. and allied customers. Demand for information-technology (IT) services and engineering support for military platforms produced a book-to-bill ratio of greater than 1 in the Information Systems and Technology segment. In addition to the backlog, the estimated potential contract value, representing management's estimate of value under unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, grew to $18.2 billion at the end of third-quarter 2009.

Performance Highlights
Revenues and operating earnings grew in all three of the company's defense-related segments in the third quarter of 2009. Combat Systems increased revenues by 26.9 percent in the quarter and operating earnings by 20.6 percent. In Information Systems and Technology, revenues grew 8.8 percent and operating earnings increased 9.6 percent while Marine Systems increased revenue by 8.1 percent and operating earnings by 10.7 percent in third quarter 2009.

"The enduring strength of General Dynamics' diverse portfolio is apparent in the company's third-quarter 2009 financial results," said company President and Chief Executive Officer Jay L. Johnson. "The company performed well despite the impact of reduced aircraft production at Gulfstream Aerospace. Continuing customer demand for our defense-related products coupled with our commitment to financial performance and effective execution produced strong margins and cash generation in the quarter.

"Based on the strength of the third-quarter results, we are increasing our guidance for full-year 2009 earnings from continuing operations to $6.15 to $6.20 per share, fully diluted," Johnson said.

General Dynamics, headquartered in Falls Church, Va., employs approximately 92,300 people worldwide. The company is a market leader in business aviation; land and expeditionary combat systems, armaments and munitions; shipbuilding and marine systems; and information systems and technologies.

Certain statements made in this press release, including any statements as to future results of operations and financial projections, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on management's expectations, estimates, understandings, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors. Additional information regarding these factors is contained in the company's filings with the Securities and Exchange Commission, including, without limitation, its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.

All forward-looking statements speak only as of the date they were made. The company does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

WEBCAST INFORMATION: General Dynamics will webcast its third-quarter 2009 securities analyst conference call, scheduled for 11:30 a.m. Eastern Time on Wednesday, October 28, 2009. The webcast will be a listen-only audio event, available at www.generaldynamics.com. An on-demand replay of the webcast will be available by 1:30 p.m. October 28 and will continue for 12 months. To hear a recording of the conference call by telephone, please call 888-286-8010 (international: 617-801-6888); passcode 26735283. The phone replay will be available from 1:30 p.m. October 28 until midnight November 4, 2009.